THIS WEEK'S REAL ESTATE STORIES

Whether it was accounting scandals making them skittish, greater competition in the mortgage market or a changing composition of mortgage products, the nation's two giant mortgage agencies were not quite the dominating players in 2004 they were earlier.

A new analysis out this week from the Office of Federal Housing Enterprise Oversight, the regulator responsible for overseeing Fannie Mae and Freddie Mac, found that the share of single-family mortgage originations represented by Fannie and Freddie purchases fell sharply last year.

The combined purchases of conventional, nonjumbo mortgages by Fannie and Freddie in 2004 represented 40% of originations of those mortgages, down from 66% in 2003.

The two government-sponsored enterprises' combined purchases of nonjumbo fixed-rate mortgages represented 47% of originations of those loans in 2004, down from 70% in 2003. Enterprise purchases of conventional, nonjumbo adjustable-rate mortgages represented 25% of originations of those loans in 2004, down from 43% in 2003.

"The declines in the enterprises' shares of the markets for fixed- and adjustable-rate loans last year were due to changes in the composition of originations in the primary market and heightened competition from other secondary-market investors," said OFHEO economist Forrest Pafenberg, author of the study. See the full text.

"In the secondary market for fixed-rate mortgages, Fannie Mae and Freddie Mac faced greater competition from banks and other non-GSE investors in 2004. Heightened competition reduced the yields on those loans and made them less attractive investments for the enterprises," Pafenberg added.

Nontraditional hybrid ARMs -- which blend the features of both fixed- and adjustable-rate loans, often with interest-only payments for a specified period -- were increasingly popular last year, but the enterprises purchased those mortgages very cautiously. Subprime loans, which the enterprises likewise purchased very selectively, also made up a larger proportion of nonjumbo, conventional ARMs in 2004, Pafenberg said.

Fannie and Freddie have been under considerable pressure due to accounting irregularities at both firms as well as ongoing criticism from some in Congress and among business interests over the size of the two enterprises.

Fannie and Freddie are publicly chartered but shareholder owned corporations charged with keeping U.S. mortgage markets flowing smoothly. To do that, they both purchase mortgages from other lenders to hold in their portfolios and package and sell mortgage securities.

Perhaps the market for mortgage loans is getting more diverse. Certainly, there has been plenty of capital available in the U.S. residential lending market as our housing boom attests.

But if this newfound competition for Fannie and Freddie is based on upstart companies buying up all those riskier ARMs and interest-only mortgages, it might not be Fannie and Freddie's stability we have to worry about should the market come crashing down around us.

Steve Kerch, real estate editor

Make sure lender accepts extra principal payments

Issues on people's minds: Can my lender refuse to accept the extra principal payments I send in each month and how exactly does the capital-gains exclusion on home sales work? See Realty Q&A.

Fixing up homes to sell can be risky

My husband and I recently bought a house. The house was in good condition, but we made some minor changes to it. It was a great experience. We are thinking of doing this kind of work as a second job. My husband has a good income, but I am a full-time student. We have $50,000 in savings, but I'm not sure we're doing the right thing. Is it a good idea to buy houses to fix and sell? See House Talk.

End of boom need not be dire

As the U.S. confronts its own housing-price boom, Australia's experience suggests that the end of a boom needn't necessarily lead to widespread economic distress. So long as most people decide to hold on to their homes and ride out the storm, the economy can hold up. Australia has yet to experience a trigger, such as widespread job losses or a spread of panic about the real-estate market, that would drive owners to unload their homes en masse and create a crisis. See story from RealEstateJournal.

U.S. housing gets even less affordable

After dropping almost steadily for three years, an important measure of housing affordability has reversed course, a development that could help put the brakes on prices in some of the nation's hottest markets. See story from RealEstateJournal.

The secret business of building spy buildings

It looks like any other office park in the U.S. -- a series of boxy buildings nestled in a sleepy suburb with ample parking and easy access to a highway. But many of the National Business Park's offices here are fortified to prevent eavesdropping by enemy satellites. A protective film coats the windows to stop probing microwaves. Some of the buildings have signs outside identifying their tenants. Others are anonymous -- the only clues to their inhabitants are the foreboding black fences and the black-clad security guards. See story from RealEstateJournal.

Sidestepping risks when buying or selling a home

You can't go wrong with real estate. Yeah, right. I doubt we will see a nationwide real-estate meltdown. But who needs a meltdown? All it takes is weakness in some local markets, combined with a little personal misfortune, and things could get ugly for some homeowners. Want to make sure your home doesn't turn into a house of horrors? Here are the five key risks in today's overheated housing market -- and how you can protect yourself. See Getting Going.

Hot housing market leads to agent burnout

The housing frenzy has been a boon for real-estate brokers, but for some, it's come at a personal cost. Particularly for new agents, the heated market is taking a stressful toll. See story from RealEstateJournal.

U.S. mortgage rates edge higher in latest week

Long-term mortgage rates inched higher in the week ended Thursday as a gradual rise in the yields on longer-maturity Treasury securities continued to press interest rates. Freddie Mac said the 30-year fixed-rate mortgage averaged 5.66%, up from 5.62% a week earlier. That still leaves the benchmark mortgage below its year-ago level of 6%. See Mortgages.

Searching for a home in Atherton, Calif.? Beware of Googlers

Manuel Henriquez wanted a house in Atherton, Calif., last fall, but he knew time was running out: The Google money was coming. See story from WSJ.com.

Housing still strong, but lax lending's a worry

Analysts say U.S. home-building companies remain well-positioned for future growth due to strong demand for housing, but higher interest rates and lax lending standards may present a problem if the overall economy falters. See Weekend Investor.

Homes with hangars in fly-in communities

There are more than 500 residential airparks in the United States, according to www.livingwithyourplane.com. These fly-in communities soften the second-home commute by offering recreational pilots direct access to their homes by aircraft. See Retreats.

Show me the money: shopping for a mortgage

Once you've figured out how much house you want (and where), it makes sense to go shopping for a mortgage before even looking at properties. See story from RealEstateJournal.

Hurricane-proofing gets elaborate in Florida

As Hurricane Frances plowed through Delray Beach, Fla., last September, Gil Knauer and his wife were safely hunkered down inside their spacious home in a gated country-club community. Then the lights went dark for what turned out to be four days. About 10 months later, with parts of the Florida Panhandle region reeling from Sunday's arrival of Hurricane Dennis, the Knauers aren't worried about the next power outage. The reason: He paid about $25,000 for a 40-kilowatt generator that burns propane from a 500-gallon tank buried in his front yard. See story from RealEstateJournal.

Japan's bubble burst may not echo in U.S.

As U.S. home prices shoot to unprecedented highs in many regions, the notorious property bubble in Japan presents a scary scenario. See story from RealEstateJournal.

Real estate is the new dot-com at U.S. business schools

Professors at the University of California at Berkeley were stunned back in 1998 when only four students signed up for a real-estate strategy course. Everyone else, it seemed, was trying to snag seats in technology classes and get in on the dot-com action. What to do? Berkeley's Haas School of Business quickly changed the course's focus to real estate and e-commerce and attracted 60 students in no time. See story from CareerJournal.

Beware of high mortgage closing costs

Whether you're buying a new home or refinancing, closing costs will hit you at the end of the transaction. Many buyers, who've focused their attention on their down payment, have been surprised and unprepared for miscellaneous closing costs, sometimes as high as 4% to 5% of the purchase price. See Marshall Loeb's Daily Money Tip.

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